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Disco ownership shift won’t fix electricity

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By Okunloye Abiodun

Gas-to-power in the naira currency will eliminate the instability caused by FX.

Various stakeholders in the power sector conveyed to the federal government that changing the ownership of the electricity Distribution Companies (Discos) would not effectively address Nigeria’s issues with power supply. In a recent statement, Mr. Adebayo Adelabu, the Minister of Power, suggested selling gas-to-power in the naira currency as a solution to eliminate the instability caused by transactions conducted in dollars. Over 300 professionals, including academics, industry practitioners, policymakers, and regulators, collaborated at the maiden edition of the Nigerian Electricity Supply Industry (NESI) Market Participants and Stakeholders Roundtable held in Abuja. The consensus among attendees was that implementing a tariff regime that accurately reflects the costs involved is imperative.

Prof. Stephen Ogaji, the Chairman of the Central Planning Committee and Mr. Bode Fadipe, the Secretary of the conference, respectively, signed the communiqué highlighting the critical problems affecting the power sector. Insufficient power generation capacity, underutilisation of generated power, and stranded generation capacity were identified as key issues. The statement also mentioned the current constraints faced in the sector, including limited gas volume and pressure, transmission challenges, difficulties in collection and financing, and a misalignment of risk. Attendees voiced their concern that changing the gas pricing to naira would greatly reduce the motivation to sustain domestic gas production.

About 7 million customers are unmetered, and 3 million are outdated.

They emphasised that gas prices will continue to rise until full recovery for parity concerns is achieved. Besides, producers will not take on or tolerate the risk associated with currency exchange. They emphasised that the absence of efficient agreements and the debts from consumers who fail to pay for their electricity will pose a serious problem. Regarding the distribution aspect, it pinpointed the noteworthy Aggregate Technical, Commercial, and Collection (ATC) matters. They debate over the fact that the sold assets in FX were not reinvested into the business but instead utilised to settle the obligations towards the staff. Furthermore, the lack of extensive metering played a significant role in various problems, including electricity theft, incorrect billing, and financial setbacks for power distribution corporations.

In Nigeria, it was emphasised in the communication that about seven million customers lack energy meters, while three million customers have outdated meters. Presently, there is a lack of transparency and accountability regarding allocating funds for interventions in privatised distribution companies and meter acquisition. Concerning power transmission and grid stability, participants pointed out that despite the promises made by the network code, lingering implementation issues still require immediate resolution. Key concerns raised by experts included the absence of efficient metering systems at both entry and exit locations, as well as the lack of SCADA and uncontrolled conditions for all suppliers.

Outdated equipment and inadequate infrastructure transmission network.

According to the statement, Nigeria transmission network suffers from outdated equipment and inadequate infrastructure, which hinders the smooth distribution of electricity nationwide. Other challenges included the absence of investment in the super grid, hindering the movement and export of bulk power. Additionally, they highlighted the lack of at least 10 percent reserve margins as mandated by the grid code, the ineffective implementation of a spinning reserve regime, and difficulties related to financing, liquidity, and recapitalisation in the electric power sector. Also, transferring ownership of Discos won’t resolve any issues; instead, progress in this sector can only be achieved by injecting funds that are linked to specific achievements. The NESI has always lacked sufficient funds, as only the Central Bank of Nigeria (CBN) has provided interventions in the market.

Investors’ acquisition payments for the Discos were utilised to address the remuneration of Power Holding Company of Nigeria (PHCN) employees rather than to enhance the network. The departure of major consumers from grid power is not solely driven by expenses but predominantly influenced by the consistent unreliability of the power supply. According to the statement, the power industry in Nigeria must shift towards cleaner and sustainable energy sources, reducing fossil fuel dependency and mitigating the ecological consequences of power production. It also emphasised the urgency for fortified institutions and enhanced Nigerian power sector regulations to tackle market competition, contract enforcement, and investor trust.

Incentives for granting gas blocks will entice more participants.

Lastly, to entice more participants in the gas industry, the group expressed the need for Nigeria to provide incentives when granting gas blocks. They emphasised the necessity for NERC to enforce a fair tariff structure that reflects the costs involved, encouraging investment, guaranteeing sufficient revenue, and promoting efficient energy usage. It should be regarded as an accomplishment resulting from these efforts rather than a precondition. To promote energy conservation and the adoption of eco-friendly practices and technologies, it is crucial for discos to implement energy-saving programs and initiatives. Additionally, discos should aim to enhance billing accuracy, increase revenue collection, and mitigate electricity theft by extensively implementing advanced smart metering systems.

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NERC: Website

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2 months ago

Disco ownership shift won’t fix electricity. – Gas-to-power in the naira currency will eliminate the instability caused by FX. – Express your point of view.

Adeoye Adegoke
2 months ago

While the ownership shift in the disco sector may not be a cure-all for the electricity challenges, implementing gas-to-power in the naira currency could definitely help address the instability caused by foreign exchange fluctuations.
One of the major issues in the power sector has been the reliance on imported gas, which is often priced in foreign currency. This exposes the sector to the volatility of exchange rates and can lead to increased costs for electricity generation. By transitioning to a system where gas is purchased and priced in naira, it can help eliminate some of the uncertainties associated with foreign exchange and create a more stable environment for the power sector.
A more stable currency for gas-to-power transactions can lead to more predictable costs for electricity generation, which in turn can have a positive impact on the pricing and availability of electricity for consumers. It can also provide a boost to the overall power sector, attracting more investments and fostering the development of a reliable and sustainable energy infrastructure.
While it’s true that the challenges in the electricity sector are multifaceted and require a comprehensive approach, implementing gas-to-power in the naira currency is a step in the right direction. It addresses a specific issue and has the potential to contribute to the overall stability and improvement of the power sector in Nigeria.
I’m hopeful that with such initiatives, we can gradually work towards a more reliable and affordable electricity supply for all Nigerians. 🏢💡

2 months ago

Addressing power sector challenges is crucial. While ownership changes might not solve issues, selling gas-to-power in naira and focusing on cleaner energy sources, efficient regulations, and fair tariffs are promising steps. Improving metering, addressing transmission network issues, and ensuring funds are used for enhancements are priorities for a reliable power supply. Encouraging investment, energy conservation, and implementing smart metering systems are vital for progress.

2 months ago

selling gas-to-power in nairas as a way to get rid of the volatile issues that are seriously harming the power industry. The environment for the power sector needs to be improved, and the main problems highlighted were stranded generation capacity, underutilized generated power, and insufficient power generation capacity.
A more stable currency for gas-to-power transactions may result in more predictable costs for the production of electricity, which may therefore benefit consumer price and supply of electricity.

2 months ago

A change in disco ownership won’t make the electricity work. The FX-induced volatility will be eliminated by using the naira as a gas reserve. It’s imperative to address the issues facing the power sector. Selling gas-to-power in naira could stabilize transactions, even though turning the Disco into a different entity might not be the only answer. Transmitter infrastructure upgrades, equitable tariff structures, and better metering must be given a priority. For a sustainable and dependable power supply, moving toward greener energy sources and implementing stricter regulations are essential.

Last edited 2 months ago by Taiwo